Globalisation occurred through the expansion of capitalism on a world scale. This essay will examine the meaning of Globalisation; analyse the concept it has on currently shaping the world economy, and discuss the impact on business. In addition to this, using the three competing views on Globalisation, Neo-classical, Socialist/Marxist, Structuralist, as summarised by Wetherly and Otter (2014), this essay aims to present, compare, discuss the three perspectives on Globalisation, by critically assessing the arguments of each perspective, highlighting the historical background. Furthermore, demonstrating a critical understanding of the ethical issues which surround Globalisation using examples from different companies and countries to assess how they have been affected by the phenomenon of Globalisation.
The essay will conclude with a summary synthesising the key findings. There are different perspectives on how Globalisation has affected business and economy today, as well as Scholars having different views and the big question whether Globalistion is positive or negative, amongst the world we live in today. There are strong scholars of Optimists and strong scholars of Pessimists when looking intensely into the definition of Globalisation. The dictionary definition of Globalisation is “The process enabling financial investment markets to operate internationally, largely as a result of deregulation and improved communications.” Collinsdictionary.
com. (2018) Furthermore another definition expressed by Scholars, “Globalisation is the process by which it is argued that the world has become more integrated… an increase in flows across boundaries…
not only economic flows of trade and investment in the form of multinational companies… also the transmission and mixing of cultural influences, migration and increased communication”. (Wetherly and Otter, 2014:267) “The creation of linkages or interconnections between nations. It is usually understood as a process in which barriers (physical, political, economic, cultural) separating different regions of the world are reduced or removed, thereby stimulating exchanges in goods, services and money”. (Hamilton & webster, 2012:384). Another view on Globalisation by a Pessimist Scholar to Globalisation ‘A destructive force or an inevitability of modern society, Globalisation is the focus of a multitude of disciplines’.
(Mooney and Evans,2007). The process of Globalisation has had many key factors which have influenced the process such as; the improvements in transportation making the transportation of goods between countries a less costly activity and the advancement of transportation has allowed people and goods to travel more quickly. Also another key contribution that has influenced the process of Globalisation is the improvements of communication, the advancement of the mobile tech and internet has opened a huge communication market between different companies and countries. Free trade has been very key in the process of Globalisation allowing barriers to be removed between countries for an easier credit flow. The labour availability and skills have shaped the process of Globalisation where countries like India, China have lower labour costs, but also have a higher skill level; the different industries take advantage of the cheap labour. ‘About 3 billion people live in “new Globalising” developing countries.
During the 1990s this group grew at 5 percent per capita compared to 2 percent for the rich countries. The number of extreme poor in the new Globalisers decline by 120 million between 1993 and 1998. However, many poor countries-with about 2 billion people have been left out of the process of Globalisation. Many are becoming marginal to the world economy, often with declining incomes and rising poverty.’ Documents.worldbank.org. (2018) There are also many key factors as to why there are strong views expressed of pessimist for Globalisation.
Where some of the negative impacts of Globalisation include it only operating and having a positive effect on rich countries, making the rich richer and dominating world trade at the expense of the poorer countries. In addition to this there is no strict enforced international laws which runs the risk of slave labour, poor working conditions, polluted environments, for the local workers working cheap labour. Also as the process of globalisation is evolving the countries are all integrating into one which leaves the fear of the threat of the world’s cultural diversity in jeopardy. ‘According to Amartya Sen, a Nobel-prize winning economist, globalsiation “has enriched the world scientifically and culturally, and benefited many people economically as well”. The united nations has even predicted that the forces of Globalisation may have the power to eradicate poverty in the 21st century.
‘ Economist.com. (2018). ‘Globalisation is expected to promote efficiency, productivity and hence, higher economic growth rate. In a controlled and regulated economy, there is no inducement to the industries to become efficient and self-reliant as these are protected from foreign competition through import restrictions and from domestic competition through industrial licensing. Globalisation has one pillar of liberation. Liberalisation and the market principles improve the allocative efficiency of resources.
This will increase export earnings, allow the inflow of foreign capital and technology.’ Economics Discussion. (2018). There are four distinct phases of globalisation that can be discerned in modern history. The first phase began in the sixteenth century with the passing of pre-modern localism, improvements in maritime technology leading to the great age of maritime exploration, discovery and mercantilism. The second phase from the late eigteenth century was marked by the spread of the industrial revolution and vast improvements in human technology, inanimate traction, productivity and demand; the globalising trend was halted by two great wars of the twentieth century, which saw a decline in international trade and capital flows as a percentage of global GDP. During the third phase, merchandise trade resumed it’s triumphant march as the engine of of hyper growth in East Asia from the 1970’s. Globalisation arguably entered a frenetic fourth phase from the end of the twentieth century, in which developed and developing countries are becoming more equal partners in the flow of cross border trade and investment.
Sheel, A. (2018) Perspectives on Globalisation: Globalisation and its effects provoke intense disagreement. The arguments about Globalisation have been around ever since scholars began to examine the worldwide expansion of markets. (Wetherly , pg266).
Neoclassical/neoliberal critics Globalisation will be a universally good thing as it will deliver the benefits of free markets capitalism to all across the globe. For Marxist and socialist writers, given the huge social, economic, and political differences between countries and groups within countries, it is unlikely that Globalisation will benefit all but, rather, only the rich elites and businesses. Structuralist and Institutionalist commentators focus on the need to ensure that the right institutional frameworks are put in place so that the potential of Globalisation can be achieved and its dangers minimized.
What unites all the three perspectives is that Globalisation has occurred through the exoansion of capitalism on a world scale. What divides them are their views as to the nature of this spatial change and its effects. (Wetherly ). The first perspective is Neo-classical views and this highly rests on ‘neo-liberal’ economic policies: free trade; deregulation of markets; a smaller state; privatisation; removal of constraints on capital mobility. In the 1970’s the many countries in the world experienced a severe economic crisis due to the government state intervening within the economy and marketplace which caused a big crash. The unemployment levels began to rise and the world trade slowed down and many of the countries economics experienced a big rise in the inflation rates which the ‘Keynesian analysis could not explain how economies could experience both inflation and unemployment at the same time’. (Wetherly & Otter 2014:54). There was too much excessive government regulations that disabled credit flow to move steadily between different countries so they went back to the basics of the economy principles on free markets.
The rightwing of the political spectrum and the neoclassical school of economic thought believed the lesson that needed to be learned was that there is no substitute for the free market at both the national and global level. (Wetherly & Otter 2014:54) This was a new relationship formed and the main perspective of the neoclassical view; where the nations united politically and economically. The Neo-classical perspective is based on the theory of absolute & comparative advantage. Pro-Globalisationist Adam Smith used the concept of absolute advantage where each country is able to benefit from globalisation from the advantages and specialisation. David Ricardo a pro-globalisationist further developed Smith’s theory and argued that free trade could benefit two countries even though one country produced all the traded commodities more efficiently than the other and this is called comparative advantage. Technology advancement Globalisation: This graph shows a timeline of the worldwide global number of monthly active Facebook users from the year 2008 to 2017. It shows up to the third quarter of 2017, where it shows that Facebook had 2.
07 billion monthly active users. It was the first social network to surpass 1 billion active users and is the most popular social network worldwide. The founder of Facebook Mark Zuckerburg is hugely for Globalisation and states his neo-classical views of it being a good thing. (millions), N.
(2018). He thinks there are pieces of infrastructure that we can build to make sure that a global community works for everyone and is very pro-globalisation. BBC News. (2018).
The second perspective is the Socialist/Marxist view. This perspective argues that the world economic and political system is highly unequal ‘The social system of capitalism is very unequal, and access to resources and political power is concentrated in the hands of the few. Believing owners of capital are able to exploit their advantage’ (Wetherly & Otter, 2014). The Socialist view belief that the world economic and political system is highly unequal. Which leads to big and growing divisions between rich and poor. Legacy of colonialism. It has been found that 20% of the world’s richest population control 86% of world gross domestic product and 82% of world exports, while the world’s poorest 20% consume, 1.3% (Herriott and Scott-Jackson, 2002).
Trade is not free and the world trade system operate in such a way as to favour richer nations; ‘But many poor countries are concerned that they are losing out and that the trade system does not work to their benefit.’ News.bbc.co.uk. (2018). Globalisation is seen as a bad thing by scholar critics such as Noam Chomsky.
There perespective argument beleives that the balance between state and markets should be restored due to their currently being a gap with free trade markets and the government states not having enough say within the policy and market legislations. The third perspective is the structuralist views where it argues that Globalisation is good, but depends on the national and global structures. Not all countries possess the same capabilities, economic system and infrastructure to tolerate neo-liberal shock policies. Poorer countries do not have the power or capability to do something where as the richer countries have huge capability to do something, which is beneficial for them and this allows globalisation to positively affect the developed countries and less inclined to benefit the developing/poorer countries in the world. Furthermore, for developing countries there is a need for less developing countries to pursue different policies due to their power within the world political regulations and policies; the poorer countries have to follow the more developed countries which brings a big negative impact on countries keeping their identity.
Scholars believe that the outcome of processes of globalization is not determined (Held et al. 1999). These scholars say that globalization is an unknown phenomenon and its outcome will not be known for many years down the road. There is a problem faced by primary good exporters due to globalisation and this structural weakness means that there is a tendency for the growth of monopoly power In the industries which are producing the most valuable commodities as powerful players emerge through takeovers and mergers. These monopolies are dominated by groups of small powerful nationals, closely connected with the multinational corporate interests.
(Wetherly & Otter, 2014). This gives a perfect example of the problems that arise of the reliance on primary goods. This perspective is different to the other two perspectives where it does not pinpoint any factors or historical events to define Globalisation, and believes it is something that has just been happening. It’s of the view ‘Where is the evidence that Globalisation would improve the well-being of the developing countries? IMF’S inability to avoid crisis and to contribute to the economic development of countries (Stiglitz, 2008) Also, this perspective does not define any historical events or factors that define globalization. Globalization is just something that has been happening with no defined past or future. Transformationalist say the power of national governments is increasing but the nature of these national governments is changing. This perspective believes that the range of factors influencing processes of globalization is much greater, and the outcomes of globalization are very uncertain.